Question

Coronado Industries purchased a depreciable asset for $1300000. The estimated salvage value is $57000, and the estimated useful life is 10000 hours. Coronado used the asset for 900 hours in the current year. The activity method will be used for depreciation. What is the depreciation expense on this asset

Answer 1

Answer:

Annual depreciation= $111,870

Explanation:

Giving the following information:

Purchase price= $1,300,000

Salvage value= $57,000

Estimated useful life= 10,000 hours.

Coronado used the asset for 900 hours in the current year.

To calculate the depreciation expense under the activity method, we need to use the following formula:

Annual depreciation= [(original cost - salvage value)/useful life of production in hours]*hours operated

Annual depreciation= [(1,300,000 - 57,000)/10,000]*900

Annual depreciation= $111,870